Sebi Rejects Adani FPI Settlement Applications

India's capital markets regulator has rejected settlement applications from foreign portfolio investors (FPIs) who held substantial stakes in listed Adani Group companies. This decision, communicated last week, revives a case that began in October 2020 when Sebi's surveillance systems first flagged unusual concentration in these holdings. The FPIs had sought to settle the case, but their proposed terms did not align with Sebi's requirements.

At the core of the issue was the FPIs' reluctance to provide full information and to 'disgorge' amounts in the hundreds of crores, as sought by the regulator. Settlement in India allows entities to resolve disputes without admitting or denying wrongdoing, but requires agreement on monetary and non-monetary terms. Sebi's investigation had identified 13 FPIs, including names like Albula Investment Fund and Cresta Fund.

The regulator's original concern centered on whether these FPIs were genuine public shareholders or fronts for the Adani Group's promoters. Despite a probe gaining global attention after a January 2023 report, Sebi faced challenges tracing ultimate beneficial owners due to a lack of foreign counterpart cooperation.

With the settlement applications rejected, Sebi will now continue legal proceedings. However, the regulator is planning to revise its settlement rules. These proposed changes could offer rejected applicants, including these FPIs, another opportunity to resolve their cases, provided circumstances have changed, for an additional 20% settlement amount.